Buying a retirement home in Costa Rica using 401k money

[Rob Pattison]

I'd like some advice on the wisdom of using $100k of my 401k money to buy a retirement home in Costa Rica.

The facts:  I'm 57 years old and live in Hermosa Beach, where I rent an apartment.  The houses here are $2 million and up.  I enjoy surfing and love living walking distance to the ocean.  I would like to own a home near the ocean where I don't have to worry about sharing walls with people, and where I can grow my own garden.

I've found out that through my employer's 401k plan, that I now can take up to $100k out penalty-free (but not tax free) as a COVID exception.  I can buy a house near the beach in Costa Rica for about that amount of money.  I visited Costa Rica 2 years ago and loved the country and the people.  They are a 5 and 1/2 hour direct plane flight away and 1 hour removed from CA time.

I plan on visiting the country in December for about a month.  Costa Rica opened up the country to Californian's on October 1st.  I'd like to visit the whole country with the goal of buying a house if one comes my way with my criteria.  If I see no houses, I wouldn't buy just to buy.

My plan would be to live in the house periodically in the short term (maybe 1 to 2 weeks every month) and Air B & B it when I'm not there.  I have a sales job in the chemical industry where I've been employed 17 years that I can run remotely for a week to a month at a time.   I've been buying non-performing notes, which I can also manage anywhere I can get an internet connection.

I'm interested in hearing the pros and cons and feedback from anyone contemplating doing what I've done, or who has done it.

[Shiloh Lundahl]

@Rob Pattison Hi Rob.  I share in your dream.  I lived in Costa Rica for 2 years about 20 years ago as a missionary.  I've been back 3 times within the last 3 years with each of my oldest 3 kids on a special father son/daughter trip and I'm planning another trip in November with my business partner to look at real estate.  I've been doing some research and contacting some local realtors like Matt Rosensteele (he has a bunch of YouTube videos on buying properties in Costa Rica). 

My guess is that it will be difficult for you to find the type of house that you are looking for near the beach with 100k.  Also, bank financing from a US bank to buy in Costa Rica may be very difficult to come by and bank financing from a Costa Rican bank may be difficult for foreigners.  With that being said, I am still going down there in November to figure something out.  I have good friends that are Costa Rican that I may leverage to help with the financing.  

My plan is to buy a home about 2000 - 2500 square feet on about an acre that has 3 - 4 small guest houses (700 - 800 2 bedroom) around it and another guest quarters for the grounds keeper who lives there permanently and maintains the property year round.  I plan to visit there often and stay in the main house and have my friends come visit me and stay in the guest houses.  I plan on using AirBnB when I am not there to rent out the homes.

This is an example of what I am talking about.